Economic incentives for fuel efficiency under a U.S. aircraft CO2 standard

To address the danger that greenhouse gas (GHG) emissions from aircraft pose to public health and welfare, the U.S. Environmental Protection Agency (EPA) is set to propose an aircraft CO2 emissions standard. The EPA may adopt the standard recommended in 2016 by the United Nations International Civil Aviation Organization (ICAO), or it could set domestic regulations that are more stringent. This paper surveys current economic incentives applied to the aviation sector and then explores additional ways to leverage the fuel-efficiency benchmark provided by the ICAO CO2 standard to promote more fuel-efficient aircraft. Adoption and implementation of these incentives could help the United States reach its goal of carbon-neutral growth for its airlines from 2020. Revenue-neutral or revenue-positive incentives are most likely to avoid socially regressive incentives for additional flying.